How do I choose between a consumer proposal and bankruptcy?

You’ve taken an important first step. You’re exploring your options to pay off debt. The next step is deciding which debt solution is best suited to the individual needs of you and your family. If you’re at the point where you are struggling to pay your bills or make monthly debt payments, are dealing with wage garnishments and harassing phone calls from creditors, or you’re feeling unable to make ends meet, you might want to consider either bankruptcy or a consumer proposal.

We can help you understand some of the similarities and differences between these two debt solutions, so you will have more information before taking the next step. A Licensed Insolvency Trustee at BDO is also always available to explain every option available to you, not just consumer proposals or bankruptcy, to help find the best solution that is right for you.

What do a consumer proposal and bankruptcy have in common?

Whether you choose to file for bankruptcy or a consumer proposal, you can rest assured that both of these options offer you the protection of the courts. This means that your creditors won’t be able to take legal action against you, and any harassing phone calls or wage garnishments will stop as will interest charges continuing to add up on your debt. These are the only debt relief solutions available that can offer these protections.

BDO’s debt relief experts can help you file for bankruptcy or a consumer proposal. Both of these solutions can only be implemented by a Licensed Insolvency Trustee, as an Officer of the Court. A BDO LIT will negotiate with your creditors on your behalf, provide guidance and support, and keep you informed throughout the either the bankruptcy or consumer proposal process. Now, let’s look at some of the differences between these two solutions.

How is bankruptcy different from a consumer proposal?

Bankruptcy has no debt limits.
A consumer proposal can only be filed for non-mortgage debt up to $250,000.

You need to provide a monthly budget.
This means you need to submit all monthly income statements and expenses to your LIT when you file for bankruptcy, including your paystubs. This is not required for a consumer proposal.

Bankruptcy can affect your assets.
When you file for bankruptcy, you won’t lose everything. However, you may need to surrender some of your assets to a LIT in order to repay your creditors. This is not the case if you file a consumer proposal.

The bankruptcy process takes less time.
When you file for bankruptcy, you are usually discharged within nine months; however, the process can potentially take up to two years. When you file a consumer proposal, it typically takes three to five years to repay your debt. This means a bankruptcy can get you back to rebuilding your credit sooner, allowing for a quicker route to controlling your financial future.

You do not need to repay a portion of your debts.
While you won’t need to make any further payments to your creditors, you may need to surrender some of your assets to a LIT during the bankruptcy process in order to repay your creditors. With a consumer proposal, you will be expected to repay some of your debts over a period of three to five years. The benefit of this, of course, is that you will keep all of your assets in the process.

Looking for more information about bankruptcy?

BDO’s licensed debt help professionals are always available to answer any of the questions you might have about bankruptcy, including “What debts can be included in bankruptcy?“ and “What assets can I keep?“

If you’d like to speak directly with a licensed debt help professional, you can request a call from us, or drop off an application form at our office. We’ll set up a time for a complimentary, no-obligation consultation to explain all your debt relief options. You’ll get the peace of mind of knowing how you can solve your debt problems.

BDO OTTAWA

INSOLVENCY DEBT CONSOLIDATION & BANKRUPTCY

BDO Canada Limited is an affiliate of BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO international Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firm.